WILLS, TRUSTS, & ESTATE PLANNING
is estate planning?
Everyone does estate planning whether they know it or
not. Estate planning may be informal, such as when you set up joint tenancy
bank accounts; or formal, such as when you draft a will. Whether you are using
joint tenancy accounts, payable on death accounts, wills, or trusts, these are
all tools to make a gift of your property to someone and my goal is to help you
make the gifts you want to make utilizing the appropriate tools for your needs.
No particular technique or estate planning tool is
right for everyone. Wills are particularly useful when some court supervision
of the estate administration may be needed or when there may be creditor issues
since the probate of a will outs off creditor claims after six months. They
also tend to be less expensive that trusts. Trusts such as Living or Revocable
Trusts provide more privacy and save some court expenses such as filing fees
and publishing costs. Sometimes they can also provide for an earlier
distribution. However, administering an estate through a trust does not cut
off creditors for two years. An individual should explore the advantages and
disadvantages of wills and trusts before deciding on using one or the other for
his/her estate planning.
Estate planning requires a determination of your
needs, the extent and nature of your resources, and an evaluation of the
options you have to utilize those assets while your are alive and effectively
transfer them to individuals or charities of your choice when you pass away.
For some people the choices may be easy and simple, but you can’t always rely
on the simplest and most inexpensive choice as being the best.
One illustration of this problem which has frequently
occurred is the parent who puts his house into joint tenancy with his
children. This involves the inexpensive use of a quit claim deed. When the
parent dies the children inherit the house without any legal procedures.
Unfortunately when the children wish to sell the home, they will have a basis
in the house for their share of the home that is based on the parent’s basis.
If there has been substantial appreciation since the house was purchased by the
deceased parent, there will be significant capital gain and thus significant
income taxes owed on the sale. Conveying the house through a proper will or
trust at the time of death results in no income tax because of a special
stepped up basis rule in the tax code. Thus the “expensive” will or trust is
in reality the more inexpensive alternative.
One should view with caution estate planners whose
advice limits your choices and the information your are given to make decisions
about your estate plan. You need to be provided choices to make an informed
decision about your personal estate plan. One of my goals in working with
people doing this planning is to make sure they make an informed decision. As
an attorney my job is to help you put in place a plan that after informed
evaluation, you feel is appropriate for you, not just sell you a particular
Estate planning can provide for a proper future for
young children who loose their parents. It can provide for the conveyance of
property with protection to those who cannot control their spending.
Appropriate estate planning can protect spouses and provide gifts to deserving
charities, or it can make a simple gift to family members. Good planning with
a discussion of all options is needed to accomplish this.
The American Bar Association has published the
following question and answer guide which you may find helpful in answering
some of your questions when considering whether or not to seek an appointment
on these matters:
Bar Association Family Legal Guide
Copyright © 2004 American Bar